EurasiaNet Business & Economics - Georgia Struggles to Redirect Wine Exports

BUSINESS & ECONOMICS

GEORGIA STRUGGLES TO REDIRECT WINE EXPORTS
Deirdre Tynan 9/01/06

Almost six months after Russia imposed a ban on Georgian wine imports, the country’s vintners continue to struggle to carve out new markets. Georgian officials have high hopes that American consumers can pick up some of the slack created by the Russian embargo, but marketing experts say it will take time to build global brand recognition.

Russia imposed the wine ban in March, amid intense feuding between Moscow and Tbilisi over a variety of political topics, including the ongoing presence of Russian peacekeeping forces in the separatist territory of South Ossetia. [For background see the Eurasia Insight archive]. Moscow justified the ban by claiming a high percentage of Georgian wine entering Russia did not meet health standards.

Georgia officials insisted that the ban was politically motivated, designed to punish Tbilisi for pursuing policies running counter to Russia’s geopolitical interests. Wine importers in the United States who already work with Georgian wines, and who are aware of the political conditions in the Caucasus country, tend to agree with that assessment.

"Of course the ban was political. � But it’s also an opportunity," said Brad Douglas, a wine importer based in Pleasant Hill, Iowa. Douglas said he would travel to Georgia later this year on behalf of his company, Gruzia, to discuss with the Georgian government an all-encompassing marketing campaign aimed at American wine drinkers.

"The ban had a substantial impact on Georgia," Douglass said. "Wine exports were the largest percentage of the country’s GDP. Georgia is already an economically small country. It’s had a severe impact across the board, on the people and on the government."

Georgian officials would like to redirect wine exports to the United States, but the going has been slow. One of the biggest barriers is a lack of familiarity among Americans with Georgian wines. "Georgian wine needs to establish [itself]," said Mamuka Tsereteli, the executive director of the America-Georgia Business Council. "In Russia, the wine enjoys recognition. Unfortunately, some of these [Georgian] brands are of terrible quality, but the wine is known and people [Russians] buy it. We need to get that same level of recognition with quality wines established in the European Union and the United States."

Tsereteli indicated that wine merchants and Georgian officials were working to improve quality-control mechanisms, and to prevent counterfeiting. The government set a September 1 deadline for grape growers in Georgia to obtain registration certificates, a move designed to help ensure high quality standards. In addition, the Georgian wine industry is developing a tracking system that will enable each bottle of legitimately produced wine to be traceable to the vineyard of origin.

American importers agree that investment is also needed to develop the overseas markets for Georgian wine. "It will take money and time," says Rita Kuparadze, a partner in Tbilisi Georgian Wines located in Brooklyn, New York.

On August 11, Georgian Agriculture Minister Mikheil Svimonishvili revealed that Russia had expressed interest in negotiating the lifting of Moscow’s wine ban. Tbilisi remains wary about Russia’s sincerity to discuss the issue.

Meanwhile, Georgian grape growers are facing an economic calamity. On the eve of the harvest season, there appears to be limited demand among wine producers for the estimated 200,000 tons of grapes that are projected to be gathered. Because of the embargo, wine makers are carrying a far higher inventory than usual, and thus are planning to produce only a comparatively small number of bottles with the 2006 vintage.

Editor�s Note: Deidre Tynan is a freelance journalist, based in Bishkek.

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